Tag Archives: political economy

Progressive Energy Subsidies

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John Hinderaker has a couple of slides from a Power Line post of his from the middle of last month that are instructive.  The first indicates the relative overt subsidy payments for a range of electric energy producer types.

In case you’re having trouble reading it, the salient parts are these: the figure shows Federal electric subsidies in dollars per MW-hr produced (2007 dollars).  The values on the left are for Natural Gas and Petroleum and for Coal at $0.25 and $0.44, respectively.  The values on the right are for Wind and for Solar at $23.37 and $24.34, respectively.  Those evil oil, natural gas, and coal companies get less than 2% of the subsidy Precious wind and solar companies get.

Pop quiz: which are the market-competitive companies?

There’s also this slide, which shows oil production rates over the last several years.  Recall its backdrop: President Obama’s claim that, on his watch, oil and gas production are up sharply.

The blue line indicates oil production on Federal land, and the Red line indicates production on private and State land.  The key interval is from 2007 on, when the Progressives had control of the Congress, followed shortly by Progressive control of the Executive Branch.  Notice that while production from private and State land was rising, production from Federal land was being driven down.  This, coupled with Obama’s slow-walking of Gulf deep water drilling permits; his refusal to allow new drilling, much less production beyond existing wells, into/from known oil deposits on Federal land; his EPA’s CO2 regulation over even a Progressive Congress’ objection; his killing of the Keystone XL pipeline; and so on, represent a far more powerful, and far more insidious, subsidy of his Precious “green” energy producers: active suppression of competition from production of cheap hydrocarbon-based energy from nearby sources.

Some subsidies are more equal than others.

Another Precinct Heard From

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Writing in Spiegel Online International, Wolfgang Kaden offers stern medicine for the present Greek crisis.  His thesis is stated at the outset:

It’s time to reinstate national autonomy—and responsibility—for determining financial policies and honoring treaties.

He goes on:

The euro has been a major experiment.  A (current) total of 17 countries with many things in common—but also many differences, such as their economies, politics, histories and ways of life—have embraced a common currency.  Contrary to the expectations of many (including myself), these differences have not grown smaller over the years.  Unfortunately, there is no reason to expect that such increased harmonization might occur in the foreseeable future.

And

…it appears entirely unlikely that European populations could be willing to, for example, relinquish their parliament’s right to make its own budget-related decisions to an EU body based in Brussels.  This also renders the notion of a fiscal union chimerical.

His solution, though, is to go back to the Maastricht treaty roots, terminate bailout efforts—and not just for Greece—and require individual member nations to see to their own fiscal houses, without welfare payments from their fellow member nations.

The advantages which he lays out for this return are these:

…going back to the original state of things also means returning to an environment controlled by market forces.

The hard truth is that the voters in each country make the final decision about whether to honor or violate treaty obligations, so they also bear the responsibility for dealing with the consequences of their own decisions.

But then he says:

Those incapable or unwilling to [toe the economic line] need to get out—of their own accord rather than by getting the boot.

But such a solution does not address the fundamental reason for the failure of the euro zone—that utter lack of a consistent world view on the part of the constituent nations.  Given the broad differences the nations have concerning, for instance, the purpose of money, such consistency is impossible—nor should one be imposed from on high.  Aside from the immorality of the imposition, and its attack on individual liberty, the imposition would be illogical.  If the member nations are to be left to their own devices in getting out of their troubles, they must be left to their own considerations of what is important to them.  Yet these differences make it impossible for every nation to toe the euro zone’s—much less the Maastricht and Lisbon Treaties’—economic line.

My take is that Greece should depart the euro zone.  Europe, as a whole, does not need a common currency.  Instead, Europe should be decomposed into separate and distinct common currency zones, each of which must consist of a far more homogeneous membership, in terms of societal imperatives and political and economic philosophies.  This greater commonality of purpose will make each individual currency zone far stronger than is the present entire euro zone, and were these currency zones to form a free trade zone the members would be yet stronger.  As for Greece, it easily could become an effective and valued member of one of these smaller, more homogeneous groups.

Energy Policy and Government

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Recall that not-yet-Secretary of Energy Steven Chu said in 2008

Somehow we have to find a way to boost the price of gasoline to the levels of Europe.

In light of rapidly rising gasoline prices in the last few weeks, now Secretary of Energy Chu testified before the House Appropriations Committee earlier this week.  In the course of that appearance, he answered a question from Congressman Alan Nunnelee (R, MI) about whether it “is the overall goal to get our price” of gasoline down.  “No,” answered Chu.  “The overall goal is to decrease our dependency on oil….”

Coupled with the Obama administration’s slow-walking of permits—even after a Federal court had ordered the administration to quit stalling—for deep water drilling in the Gulf of Mexico, President Obama’s killing of the Keystone XL pipeline, his refusal to allow drilling on Federal lands, and on and on, it’s quite clear the Obama has no intention of expanding America’s access to domestic oil and gas any faster than he absolutely has to, being dragged kicking and screaming to greater production.  He’s not at all interested in lower gasoline prices, or in lower energy prices generally.  Not at the expense of his (heavily subsidized) “green” energy projects.

Even knowing, as he surely does, that every 25₵ increase in the price of gasoline takes $35 billion annually out of the economy—out of the hands of Americans—he’s not interested.  Never mind the money taken out of Americans’ hands by higher home heating costs through higher oil and gas prices (which underlie the rising gasoline prices), or the higher costs of air travel from resulting higher jet fuel costs, or the higher cost of goods shipping, or the higher costs of production—and so higher end-product costs to us consumers—from higher energy costs to our manufacturers, and….

Later, at his daily mid-day press conference hosted by his Press Secretary, Jay Carney, Obama even tried to pretend he was unaware of his Energy Secretary’s testimony.

Reporters today asked White House Press Secretary Jay Carney about Energy Secretary Stephen Chu’s controversial statement about gas prices.

“I am not aware of that statement or the characterization that you have given it,” Carney replied.

Obama then claimed, through Chu’s follow-up Congressional testimony Thursday, that he really did want to lower the price of gasoline.  How, though, is it possible to believe him?

This is Stimulating

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…on a couple of levels (but, no, it didn’t generate a tingle down my leg).  Paul Chesser, of the National Legal and Policy Center, wrote about a law firm and Fisker Automotive earlier this week.  Of particular interest to me in the article were two things.  One was this:

Debevoise & Plimpton LLC, received $1,842,180 in Recovery Act funds to provide legal advice, conduct due diligence, and review documents for two loans from DOE’s Advanced Technology Vehicles Manufacturing Loan Program.  One $529 million loan award was to Fisker Automotive to develop and produce two lines of electric vehicles….

Debevoise provided the same services to DOE for its $5.9 billion loan to Ford Motor Company, to convert five of its factories…so they can produce more fuel-efficient vehicles.

That’s a potful of taxpayer money for what seems a straightforward legal task (I won’t go into the political donations employees of the firm made; there’s more of that in the article.  Besides, there’s no evidence of anything illegal having been done here).  Perhaps some of the lawyers reading this can weigh in on the actual costs and charges such analyses normally entail.  I also wonder how many jobs were “saved or created” by this particular Stimulus payout.  Oh, wait, Chesser addressed this:

At the height of its legal services activity for DOE, 1.25 jobs were created that were attributable to Debevoise’s work on the two loans.

The other thing is the quality of the due diligence and analysis provided.  Now it’s certainly possible that loans on which proper due diligence has been done will still fail.  But getting information about this particular loan analysis out of the Department of Energy has been like pulling teeth from a chicken.  Judicial Watch has been forced to sue in Federal court under the Freedom of Information Act to get any serious data concerning this loan of taxpayer money.  The cynic in me has to ask what information has the administration so nervous.

Two Economic Plans

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Here is a sort-of side-by-side comparison of Senator Rick Santorum’s economic plan with Governor Mitt Romney’s plan—only sort-of because they address different things in addition to their areas of overlap.

Senator Santorum opened the discussion of his plan with this:

…Obamanomics has left one in six Americans in poverty, and one in four children on food stamps. Millions seek jobs and others have given up.

while Governor Romney had similar words to introduce his plan:

We have record-breaking unemployment and deficit spending, and a tax code that looks like it was devised by our worst enemy to tie us in knots. These three afflictions are interconnected. I have a plan to address them and achieve three goals: more jobs, less debt, and smaller government.

Economic Area

Santorum’s Plan

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Romney’s Plan

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Individual Taxes

 only two income tax rates of 10% and 28%. triple the personal deduction for children, eliminate the marriage tax penalty. Strong step in the right direction in simplifying through reducing the number of tax brackets while reducing tax rates.But why keep the distorting subsidy? 20% reduction in marginal individual income tax rates A step in the right direction, but it maintains the multiplicity of tax brackets

 

 reduces tax rates for businesses that pay at individual rates and employ the majority of private-sector American workers Through the above 20% reduction

 

 abolish the death tax.  repeal the Alternative Minimum Tax Unequivocally good moves

 

 place some curbs on personal tax deductions, exemptions and credits Such as…?

Corporate Taxes

 corporate tax rate halved to a flat rate of 17.5%. expense all business equipment and investment. Taxes on corporate earnings repatriated from overseas eliminated Again a sound move.  But see my summary below about manufacturing taxes. reduce the corporate tax rate to 25% from 35%, transition from a world-wide taxation system to a territorial one A good step in the right direction.Especially, the territorial tax system can be very beneficial, depending on its details.

 

 make the R&D tax credit permanent Lower the tax rate further, and this distortion isn’t necessary.  Nor will it be necessary y to weasel-word what constitutes R&D.

 

 maintain the 15% rate on capital gains, interest and qualified dividends, and eliminate the tax entirely for those with annual income below $200,000. Mostly maintains the status quo, but the differential treatment of groups of Americans just continues Obama’s class warfare.Also, see above concerning distortions and tax rates.

 

 broaden the corporate tax base. In what way, exactly?

Federal Spending

 spending cuts of $5 trillion over five years, including cuts for the remainder of fiscal year 2013 A sound start, but reduced spending in what areas?

 

 cut means-tested entitlement programs by 10% across the board, freeze them for four years, and block grant them to states A good start, but why not reduce the size of the grants each year until they’re eliminated?  These are supposed to be State programs: get the Federal government out of them altogether.

Federal Budget

 propose budgets that spend less money each year than prior years Reduced spending in what areas?

 

 submit to Congress a budget that will balance within four years; call on Congress to pass a balanced-budget Constitutional amendment which limits federal spending to 18% of GDP. Reduced spending in what areas?An Amendment can be good or bad depending on how it’s written.Finally, calling for a thing is easy to do….

 

Unstated in his present plan is his prior insistence on continuing to use our tax code to perpetuate the myth of the usefulness of government-centric economic engineering: he singles out manufacturing for especially low tax rates—no manufacturing corporate tax at all.

In addition, Santorum had this to say about jobs: he’d approve the Keystone XL pipeline, and he’d repeal all “Obama administration regulations that have an economic burden over $100 million.”  I don’t understand, though, why he exempts similar regulations from earlier administrations.  He also insists that Federal agencies must use “sound science and cost benefit analysis;” although here, too, he’s short on specifics, like what analyses fit this bill, or what constitutes “sound” science and cost benefit analysis.

Santorum also says he’ll work to replace Obamacare with “competitive insurance choices,” but without saying what constitutes “competitive” in his view—and he claims to be able to achieve this while maintaining a mandate that somebody must “protect those with uninsurable health conditions.”

Finally, he promises to present to Congress five free trade agreements his first year—but with whom?

Romney, on the other hand, expects his lower taxes to stimulate job growth.  He’s not far wrong here, but more specifics about jobs would have been nice in addition to those tax system generalities.

Both plans are vague on spending cuts, and both continue market distorting subsidies/tax credits of one sort or another—never minding that these simply continue government-generated distortions in our economy, driving up the prices of things that are subsidized and forcing all of us to pay for those price increases, whether we buy the subsidized item or not.  The two plans also emphasize different sides of the revenue coin: Romney focuses on the tax system while Santorum dwells more on spending and budgeting.

In the end, both plans, shortfalls and all, are enormous improvements over the Progressives’ plan of increased spending, higher taxes, exploding debt, and starker class warfare.